Environmental and Natural Resources

On June 1, 2023, Arizona Governor Katie Hobbs revealed the results of a new groundwater model prepared by the Arizona Department of Water Resources (“ADWR”) that predicts the future availability of groundwater for pumping throughout most of the Phoenix Active Management Area (the “Phoenix AMA”) over the 100-year period mandated by ADWR’s Assured Water Supply Program. 

In conjunction with the model reveal, Governor Hobbs’s announcement also dropped a bombshell:  ADWR would no longer process assured water supply applications for new subdivisions in the Phoenix AMA that propose to rely on groundwater for their 100-year assured water supply.  The Phoenix AMA generally encompasses much of the Phoenix metropolitan area referred to as “The Valley”—one of the fastest-growing urban areas in the United States, with a large demand for new housing. The announcement is similar to announcements made for the Pinal AMA in 2021 and the Hassayampa Subbasin earlier this year.  The announcement has generated significant media coverage locally and nationally, with many of the headlines suggesting that Arizona’s aquifers are drying up.  While the Governor’s announcement is undoubtedly significant—particularly for real estate development in the outskirts of The Valley—the headlines, and the sensationalism, are overstated.  Simply put, Arizona is not running out of groundwater and ample opportunities for development remain intact.

Although we discussed the Assured Water Supply Program in this blog a few weeks ago, the new Phoenix AMA groundwater model and the Governor’s declaration that ADWR would no longer approve new assured water supply determinations based on groundwater in the Phoenix AMA requires that we revisit the subject and provide more detail.

The Adequate Water Supply Program

The Adequate Water Supply Program is the precursor of the Assured Water Supply Program.  It was created in 1973 as a consumer protection program, just a few years after Arizona Republic reporter Don Bolles uncovered a major land fraud scheme. The program requires land developers to seek a determination from ADWR that there is enough water available to supply a new subdivision’s needs for 100 years.  Under Arizona law, a subdivision is defined as “improved or unimproved land or lands divided for the purpose of sale or lease, whether immediate or future, into six or more lots, parcels, or fractional interests.”  A.R.S. § 32-2101(58).[1]  There is no requirement that the lots must be for residential use; they can be intended for any purpose.  Any time six or more lots are developed, the seller must disclose to the first buyer whether there is, or is not, a 100-year water supply.  The Adequate Water Supply Program still exists today, 50 years later, outside of the Active Management Areas that were established in the 1980 Groundwater Management Act (often referred to as the “Groundwater Code”). 

The Groundwater Code

The Groundwater Code established areas of the state for enhanced groundwater protection, called Active Management Areas (“AMAs”) and Irrigation Non-Expansion Areas (“INAs”).  In these locations, the Groundwater Code imposes extensive regulatory requirements that limit access to groundwater in ways that greatly limit the “reasonable use” doctrine that applies elsewhere in the state. 

Four initial AMAs were created in the Groundwater Code:  Phoenix, Pinal, Tucson, and Prescott.  Later, the Santa Cruz AMA would be carved out of the Tucson AMA, and the Douglas AMA was voted into existence in November 2022.  Each AMA has its own management goal and adopts conservation measures in a series of management plans to help achieve the management goal. In the Phoenix AMA, the management goal is to achieve “safe-yield” by 2025.  Safe-yield is defined in the Groundwater Code as “a groundwater management goal which attempts to achieve and thereafter maintain a long-term balance between the annual amount of groundwater withdrawn in an active management area and the annual amount of natural and artificial recharge in the active management area.” A.R.S. § 45-561(12).

In the AMAs, groundwater may only be withdrawn if a pumper has: (1) a grandfathered groundwater right based on historic groundwater use prior to creation of the AMA; (2) a service area right issued to municipal water providers and irrigation districts; (3) a groundwater withdrawal permit; or (4) an “exempt” well that pumps less than 35 gallons per minute. In addition, groundwater users exercising one of these rights generally must also comply with conservation measures intended to ensure efficient use of groundwater. These conservation measures are intended to become more stringent over time to gradually ratchet down groundwater pumping.  In the INAs, groundwater use for irrigation purposes is limited to those lands that were in irrigation at the time the INAs were established.

The Assured Water Supply Program

The Groundwater Code also created the Assured Water Supply Program, largely modeled after the Adequate Water Supply Program, but with stricter requirements.  While subdivision developers outside of the AMAs must only notify the first buyer of a lot if they have a 100-year water supply, subdivision developers (using the same definition for “subdivision” described above) inside the AMAs must prove that they have a 100-year water supply before they can legally sell a single lot.  The developer must demonstrate to ADWR that:

1. The water supply required to serve all water uses within the subdivision is legally, physically, and continuously available for one-hundred years;
2. The water is of adequate quality;
3. The water provider has the financial means to deliver water to the lots;
4. The proposed water use is consistent with the AMA management plan; and
5. The proposed water use is consistent with the AMA management goal.

To fully understand the impact of the new Phoenix AMA groundwater model, it’s important to highlight two of the Assured Water Supply criteria.  First, to prove physical availability, the water provider must demonstrate that any groundwater used for the supply will not cause the water table to decline below specific elevations established in ADWR’s Assured Water Supply regulations. In the Phoenix, Tucson, and Prescott AMAs, that depth is 1,000 feet below ground surface.  Arizona Administrative Code § R12-15-716.  In the Pinal AMA, the maximum depth is 1,100 feet, and for Adequate Water Supply purposes outside of AMAs, the depth is 1,200 feet.  Id.  This maximum depth restriction is a unique feature of Arizona water law, as it does not appear to have an equivalent anywhere else in the United States.  The 100-year planning horizon is also among the most stringent in the nation.

The second feature to highlight is the requirement that the water use must be consistent with the AMA management goal.  To be consistent with the goal of “safe-yield,” applicants for an Assured Water Supply who rely heavily on the use of groundwater most often take advantage of a program offered by the Central Arizona Groundwater Replenishment District (“CAGRD”) to maintain the needed equilibrium required by the Phoenix AMA’s safe-yield goal.  Under this program, owners of lands enrolled in the program must pay the CAGRD to recharge the aquifer with renewable water supplies in a volume sufficient to offset their use of groundwater.  The replenishment program even allows a landowner to use groundwater as the sole source for a subdivision development provided the groundwater is fully replenished with renewable supplies by the CAGRD.  

The Assured Water Supply Program provides assurance to both homeowners and commercial subdivision lot owners that there will be water available for at least 100 years from the date that the seller received a Certificate of Assured Water Supply or the date that the development received a commitment to serve from a municipal water provider with a Designation of Assured Water Supply from ADWR.

Certificate of Assured Water Supply vs. Designation of Assured Water Supply

A Certificate of Assured Water Supply (“CAWS” or “Certificate”) is issued by ADWR to the developer of a subdivision who has met the requirements of obtaining an Assured Water Supply and has received a “will serve” letter from a water provider who will deliver the water described in the Assured Water Supply application to the subdivision lots. When a CAWS is issued, any groundwater included in the CAWS is essentially reserved in the aquifer for that subdivision. CAWS are often issued to developers located on the fringes of suburban development outside of the service area of a municipal water provider that has a Designation of Assured Water Supply (“DAWS” or “Designation”). 

A DAWS is issued by ADWR to a municipal water provider that has demonstrated it meets the requirements of the Assured Water Supply program.  When a municipal water provider obtains a DAWS, it can then provide water to any new development within its service area if the current and projected demands, including the demands of the new development, do not exceed the physical availability limitations incorporated in the DAWS. If the new development does increase demands beyond what was approved in the DAWS, the DAWS will need to be modified to address the increased demand before service to the development can begin.

Analyses of Assured Water Supply

An important tool authorized in the Groundwater Code that is commonly used by developers is the Analysis of Assured Water Supply (“Analysis”).  When a landowner is in the early stages of planning a subdivision development, they often obtain an Analysis to essentially get pre-approval for an aspect of the CAWS, usually to satisfy the physical availability requirement.  An Analysis requires substantial investment by a developer, hiring consultants and sometimes attorneys to assist in proving that there is sufficient water available to meet the demands of their subdivision.  If ADWR approves an Analysis, this effectively sets aside the proven quantity of water for a proposed development until issuance of a CAWS.

The New Phoenix AMA Groundwater Model

A groundwater model is a computerized representation of an aquifer that water regulators, managers, and policymakers can use to make a variety of determinations, such as predicting the impact of future pumping on the availability of groundwater and the depth of the water table.  To create the Phoenix AMA groundwater model that Governor Hobbs revealed on June 1, ADWR used historical information to build and calibrate a model representing changes in the aquifer underlying the AMA over the period from pre-1900 to 2021. ADWR then extended the historical simulation until 2121 by estimating future pumping demands based on groundwater use approved under the Assured Water Supply Program and other uses expected to occur during the next 100 years.

According to ADWR, its 100-year projection indicates that by 2121 the demand for groundwater in the Phoenix AMA will exceed the “physically available” supply by four percent—resulting in “unmet demand” in several areas of The Valley, particularly in the outer fringes of urban development. ADWR is taking the position that this “unmet demand” means that a 100-year supply of groundwater is not “physically available” for new development anywhere in the Phoenix AMA, except for developments for which ADWR has already issued a CAWS or that will be supplied by a municipal provider with a DAWS.  Because “physical availability” of groundwater for 100 years is one of the legal requirements for approving a CAWS, ADWR announced it will no longer grant CAWS to new subdivisions in the Phoenix AMA that propose to rely on groundwater.  This also means that use of the CAGRD replenishment tool will no longer be accepted when groundwater is proposed as a source of water for a subdivision.  Moreover, at a public meeting on June 2, ADWR staff clarified that they will not honor any Analyses of Assured Water Supply that have been previously issued on the basis of physically available groundwater.  Similarly, a DAWS modification to account for additional demands is unlikely to be approved where groundwater is proposed to supply the additional demand. 

However, the lack of “physically available” groundwater is a legal concept that does not mean the aquifer is going dry.  As noted above, Arizona law provides that groundwater at depths greater than 1,000 feet below ground surface is generally not considered physically available for the purpose of showing a 100-year assured water supply in the Phoenix AMA.  See Arizona Administrative Code (“A.A.C.”) § R12-15-716.  This is true even though, in some areas of the Phoenix AMA, the depth to bedrock is greater than 10,000 feet below ground surface, indicating that there may still be substantial volumes of groundwater available below 1,000 feet.  Moreover, according to ADWR’s presentation at the June 2 meeting, groundwater will remain available in large areas of the AMA at depths of 101 to 250 feet in the year 2121 (see slide 21).  The areas where ADWR’s model predicts that water will not be available at depths less than 1,000 feet are located in areas on the outskirts of the Valley, where the depth to bedrock gets shallow as it approaches the surrounding mountains.  The possibility that groundwater may not be available in these locations 100 years from now does not mean that abundant groundwater will not be available elsewhere.

Conclusion

Despite the announcement that ADWR will no longer grant approvals to new subdivisions in the Phoenix AMA that propose to rely on groundwater, development in the Phoenix area is not coming to a halt. The Governor and ADWR took pains to confirm that the area is not running out of groundwater. Construction may continue for about 80,000 homes for which CAWS have already been issued. Development may also occur for new subdivisions with a commitment to receive water from a municipality or other service provider with a DAWS, which includes all of the major cities in the Phoenix AMA. Further, subdivisions not served by a municipal provider with a DAWS and without an approved CAWS may be able to obtain a CAWS by relying on sources of water other than groundwater, particularly in the longer term as alternative sources, such as reclaimed water, become more readily available.  And finally, avenues are available for individual developers to press forward with their CAWS applications and challenge the legal basis, technical correctness, or applicability of the Phoenix AMA groundwater model.

[1] This definition does not apply if all parcels are at least 36 acres in size.